Minethings, a multiplayer browser game I'm into

Friday, December 15, 2006

China's stupidity with pegging to the US dollar

By tacking onto the dollar, China is keeping a competitive edge over other countries selling to the USA whose currencies are rising against the dollar. To the USA, it really is no significant deal except it does add an additional barrier to getting market share in China. However, it has passed the point where it is beneficial to China. Along with tacking onto the US dollar, China experiences the increased cost of external resources like oil as other currencies rise against the dollar. This is the main barrier to continued growth in China's economy which is starting to show signs of stuttering as the effects of the dramatic increase in fuel costs are having their effect. China is strong enough to be able to deal with freeing itself from the US dollar especially when offset by cheaper oil, but as an economy controlled by its government, it suffers from the inefficient and slow decisions that governments make compared to the private sector. The greatest barrier to China's growth is its government.